Tuesday, 11 December 2018

Interserve on the Ropes, or a Model on the Ropes?

Back
in August 2017 we looked at the concept of the ‘private finance initiative’,
and also the differences between ‘public private partnerships’ and ‘private
finance initiatives’, which
has also been dissected in the literature. We looked at the issue of Carillion
and the aspects that underpinned its high-profile collapse. However, for this
post, the question will be whether the recent developments at Interserve, the
massive provider of public services in the UK, is part of a general trend or an
indication of a fundamental flaw within the model that is being adopted
currently.

One reason why they may have done this is because, for the
Government, it is not a ‘risk’ at all. Perhaps, for this Government in
particular, it is an ideological necessity that Interserve is supported, and
that Carillion was supported even in the face of negative financial
declarations. In the literature it has been identified that such partnerships
between Government and Business are essentially a ‘brand
for how governments want their interaction with business and society viewed,
or, alternatively, how they want the role of government in the economy viewed’,
which clearly hints at an ideological approach. The development of this form of
societal investment is, seemingly closely tied to the development of
globalisation, with this approach being witnessed around the world and with
companies spreading their reach to meet that demand (Interserve is a good
example of this). Yet, we have spoken here in Financial Regulation Matters many times about viewing global
developments in a cyclical manner, so with that being said what may be the
message from this uptake of public and private partnerships? The first thing to
note is that the symbiotic relationship that exists between certain political
outlooks and big business creates results, but that it is difficult to see how
they are long-term in nature. The appalling lack of oversight on instances such
as Carillion show us that the maintaining
such a relationship, for the benefit of the public, is not really a concern –
the real concern is developing tangible and public examples of development in
order to provide support for the model; for example, pictures in the media of
half-built hospitals do no good whatsoever to the development of the
partnership, which as we know is underpinned by public money. The second thing
to note is that this narrative of needing
big business to flourish has become so entrenched, it is difficult to foresee
any other model taking hold. It is not suggested here that another model should
be adopted, nor that it would be any better necessarily, but it is clear that
this current model of cartelisation on the back of public funds does not work,
and is societally damaging – so, what does this mean?

One thing that it may mean, thinking of the UK in particular,
is that suggestions that a number of key infrastructure areas will be
nationalised once Labour get into power, if they do, is easier said than done.
Nationalisation has taken place before, but this current era is dominated by
the entrenchment of a narrative (aided by the development of the internet and
social media etc.), which means change would have to be incremental if it were
to be successful. It also means that the Conservative Party, for however long
they remain in power, must continue
to support companies like Interserve, because it is their ideological position that is on the line. The relationship between
big business and government must work if the Conservative Party is to remain in
power and relevant, and as such it is anticipated that only an absolute and
sudden collapse would see Interserve vanish. The concept of ‘too big to fail’
is commonplace, but the connection of certain fields to politics must not be
ignored. In a sense, Interserve is too politically important to fail, as it represents
an ideology that has taken years to construct and implement. Yet, we are in an
era where continuing corporate failures are being contextualised by societal
instability, so the question may be how long will the public sit by and allow
their money to be utilised as a fundamental
safety net, especially when they do not directly see the financial benefit of
doing so?

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